'Creative Accounting': A Legal Approach to Earnings Management
by Teo Eu-Jin
2020-06-18 04:54:04
'Creative Accounting': A Legal Approach to Earnings Management
by Teo Eu-Jin
2020-06-18 04:54:04
Performance-based remuneration theoretically is an effective way of aligning the interests of company management with those of shareholders. However, 'earnings management' is a phenomenon that has been well-documented by accounting researchers. Empir...
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Performance-based remuneration theoretically is an effective way of aligning the interests of company management with those of shareholders. However, 'earnings management' is a phenomenon that has been well-documented by accounting researchers. Empirical studies suggest that corporate officers who are subject to performance-based remuneration may manage company accounting figures to improve their remuneration. In a pre-International Financial Reporting Standards context, this work contends that such practices are inconsistent with the duties of loyalty to which these officers are subject, and concludes by identifying a corporate governance role for legal advisers in light of such conduct.
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